Rand falls on fading hopes for US rate cut

The rand fell the most in more than three weeks on Monday, with the JSE closing weaker amid mixed global peers as investors looked ahead to monetary policy guidance from the Federal Reserve this week.

Inflation data last week showed that consumer and producer inflation was hotter than expected, though on a downward trend.

This sparked the concern that the central bank might be forced to keep interest rates higher for longer. The outlook for inflation and interest rates remain the main themes on the markets as investors consider when the Fed will start cutting interest rates.

The local currency reached an intraday worst of R18.9997/$ — the weakest level in more than a week as “disappointment persists around US monetary policy, [and] hopes of an early start to the cutting cycle diminish”, Investec chief economist Annabel Bishop said. It is widely expected that the Fed will keep interest rates unchanged when it concludes its federal open market committee meeting on Wednesday. Investors will, however, pay close attention to the central bank’s guidance for any clues on the future direction of interest rates.

“The rand has sagged this quarter somewhat, compared with the fourth quarter of 2023, as the strong earlier market confidence of the first US interest rate cut occurring as early as March [with near a 90% probability, and another expected in May], has been sapped,” Bishop said.

By 6.06pm, the rand had weakened 1.33% to R18.9741/$, 1.23% to R20.6435/€ and 1.35% to R24.1464/£. The euro was little changed at $1.0879.

“The rand continues to be influenced largely by global financial markets, and in particular by developments in the US economy, with the currency weakening in disappointment into the end of last week on little chance of near-term US interest rate cuts,” Bishop said.

The JSE lost 0.77% to 72,430 points and the top 40 0.74%. Industrial metals gained 0.97%. Precious metals fell 3.15%, food producers 2.29%, retailers 1.38%, financials 1.08%, resources 1.05%, banks 0.98%, industrials 0.39% and SA listed property 0.18%.

Impala Platinum lost the most in the precious metals sector, down 8.58% to R71.43, while Anglo American Platinum lost 6.17% to R693.58.

At 6.15pm, the Dow Jones industrial average was 0.39% firmer at 38,850 points and the S&P 500 added 0.887%. In Europe, the FTSE 100 and Germany’s DAX were little changed, while France’s CAC 40 lost 0.21%.

Gold gained 0.12% to $2,158.14/oz. Platinum lost 1.97% to $918.02/oz. Brent crude was 1.59% firmer at $86.27 a barrel.